KeNo's Housing and Economic Portal: Tuesday November 29 Housing and Economic stories

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Cities Hit as Funds From Bonds Pay Other Bills - (online.wsj.com) Cities and states across the country are using money designated for specific purposes—such as fixing roads or sewers—in order to fill financial holes elsewhere, according to public officials and records. The moves are exposing municipalities to controversy, as federal regulators and local auditors are more heavily scrutinizing their finances to protect bond buyers and taxpayers. In Miami, the Securities and Exchange Commission is wrapping up an investigation into whether the city used funds intended for roads and other purposes to fill budget gaps elsewhere, according to people close to the probe. Bondholders are suing, saying the moves obscured the city's true finances. The city's former budget director is also suing, claiming he was fired for cooperating with the SEC and the Federal Bureau of Investigation. Then, in late October, the city's former auditor sued, alleging in the suit that he lost his job because he flagged problems then "participated, at the request of the Securities and Exchange Commission, in an investigation into whether the City of Miami was engaging in behavior tantamount to stock fraud in the marketing of its municipal bonds." Both so-called whistleblower cases are filed in a circuit court in Miami-Dade County.

'60 Minutes' Blows The Lid Off Congressional Insider Trading - (www.businessinsider.com) Members of Congress can legally make trades on non-public information they obtain during their official duties, CBS News' '60 Minutes' reported on Sunday night. Branded 'honest graft,' lawmakers can use market-moving information that they learn in congressional committees to trade on the stock market — actions that likely would carry stiff jail and civil penalties if they did not hold public office. In one example, Steve Kroft reports that Rep. Spencer Bachus (R-AL), now the chair of the House Financial Services Committee, bet against the market in the days before the 2008 financial crisis hit — after getting 'apocalyptic briefings' from Fed Chairman Ben Bernanke and then-Treasury Secretary Hank Paulson. Kroft also raises questions about the trading patterns of Speaker of the House John Boehner and House Minority Leader Nancy Pelosi — and the real estate purchases of other senators and representatives. The report relies heavily on the work of Peter Schweizer, a fellow at the conservative Hoover Institution, whose work '60 Minutes' independently verified.

UniCredit Posts a Record $14.5 Billion Loss on Impairments; Shares Tumble - (www.bloomberg.com) UniCredit SpA (UCG), Italy’s biggest bank, posted a surprise 10.6 billion-euro ($14.5 billion) loss in the third quarter, the biggest in the company’s history, amid trading losses and write-downs on acquisitions. The stock slid as much as 9.6 percent. UniCredit said today that it plans to raise as much as 7.5 billion euros in a rights offering, and it took an impairment charge of 8.7 billion euros, including goodwill on purchases in Ukraine and Kazakhstan. Excluding one-time items, the quarterly loss was 474 million euros. Analysts expected profit of 7.4 million euros, according to the average of 12 estimates compiled by Bloomberg. UniCredit, which is selling stock to plug the biggest capital shortfall among Italy’s lenders, also scrapped its dividend and said it will exit non-strategic units. The bank plans 5,200 job cuts through 2015 to bolster its finances as Europe’s sovereign-debt crisis threatens to engulf Italy.

Italy Obsessed by ‘Lo Spread’ as Yields Surge - (www.bloomberg.com) As Italy struggles to survive the European debt crisis, watching “lo spread” is becoming a national obsession. The yield difference between Italian 10-year government bonds and German bunds surged to a record 5.5 percentage points on Nov. 9 after the nation’s borrowing cost breached the 7 percent threshold that prompted Greece, Portugal and Ireland to seek bailouts. A day later, Prime Minister Silvio Berlusconi agreed to step down when an emergency budget package was passed. Italian lawmakers approved the austerity measures Nov. 12, clearing the way for Mario Monti, a former European Union competition chief, to try and form Italy’s next government. “I think it’s very scary and we are all concerned,” Gianluca Brozzetti, chief executive officer of luxury-goods maker Cavalli Group, said in a Milan interview.

EFSF denies report that it bought its own bonds - (www.reuters.com) The euro zone's bailout fund said on Sunday that it did not buy its own bonds last week, denying a British newspaper report that it spent more than 100 million euros ($137 million) to cover a shortfall of demand. Britain's Sunday Telegraph said that the EFSF had to step in after banks leading the deal were only able to find about 2.7 billion euros of outside demand. The 10-year bond sale raised 3 billion euros last Monday. "The EFSF did not buy its own bonds and the book was 3 billion euros," an EFSF spokesman said, referring to the 3 billion euros raised in last Monday's 10-year bond issue. Top officials of the EFSF have said the modest 3 billion euro issue was a reflection of the unstable market conditions.